Thursday, May 20, 2010


"In the past few weeks, Europe has certainly got the world’s attention – but not in the way that it had hoped. Rather than admiring the EU for its dynamism and power, the rest of the world is watching the unfolding economic crisis in Europe with fascination and horror. Observing the struggle to save the euro from Washington or Beijing is a bit like watching a car crash on the other side of the road. It is bad enough being a spectator – but there is the added fear that you will be hit by flying debris....

It is natural that international attention should focus first on the economics of the crisis in Europe. But there are also broader, if less immediately obvious, political consequences. It is easy to mock the pretensions of the authorities in Brussels. But the fact is that the EU does – or perhaps did – stand for something important on the world stage.

What Europe represents is not so much raw power as the power of an idea – a European dream. For internationalists everywhere, for believers in much deeper co-operation between nations, for those pushing for the establishment of an international legal order, the EU is a beacon of hope.

If the European experiment begins to unravel – after more than 60 years of painstaking advances – then the ideas that Europe represents will also suffer severe damage. Rival ideas – the primacy of power over law, the enduring supremacy of the nation state, authoritarianism – may gain ground instead....

However, the European economic crisis has made life much harder for those Americans or Asians who want to argue that the rest of the world should learn from Europe. Last week I met a member of the Japanese establishment who was guffawing at the idea that his prime minister had ever believed that Europe could be some sort of model. In the US, the European financial crisis has been seized upon by conservatives, who argue that Mr Obama’s alleged embrace of European-style “socialism” will bankrupt America.

While the EU’s foreign admirers are on the defensive, international Eurosceptics are in the ascendancy. Charles Grant, head of the Centre for European Reform, a pro-EU think-tank, says he has been struck on his recent travels by the growing disdain for Europe in Delhi, Beijing and Washington. “We’re seen as locked into permanent economic and demographic decline, and our pretensions to hard power are treated with contempt,” he laments.

A few years ago Jeremy Rifkin, an American author, published a book called The European Dream, which made a great splash in Brussels. Mr Rifkin, who perhaps not coincidentally also wrote a book called The End of Work, argued that Europe was a model for the future. “While the American spirit is languishing, a new European dream is being born,” he wrote. “It is a dream far better suited to the next stage in the human journey – one that promises to bring humanity to a global consciousness befitting an increasingly interconnected society.”

Reading those words today, I don’t know whether to laugh or cry".

Gideon Rachman, "The Death of the European dream," 18 May 2010, in

"The Cold War made the European Union possible. For centuries, Europe was home to feuding empires and states. After World War II, it became the home of devastated peoples whose security was the responsibility of the United States. Through the Bretton Woods agreement, the United States crafted an economic grouping that regenerated Western Europe’s economic fortunes under a security rubric that Washington firmly controlled. Freed of security competition, the Europeans not only were free to pursue economic growth, they also enjoyed nearly unlimited access to the American market to fuel that growth. Economic integration within Europe to maximize these opportunities made perfect sense. The United States encouraged the economic and political integration because it gave a political underpinning to a security alliance it imposed on Europe, i.e., NATO. Thus, the European Economic Community — the predecessor to today’s European Union — was born....

But to get Berlin on board with the idea of sharing its currency with the rest of Europe, the eurozone was modeled after the Bundesbank and its deutschmark. To join the eurozone, a country must abide by rigorous “convergence criteria” designed to synchronize the economy of the acceding country with Germany’s economy. The criteria include a budget deficit of less than 3 percent of gross domestic product (GDP); government debt levels of less than 60 percent of GDP; annual inflation no higher than 1.5 percentage points above the average of the lowest three members’ annual inflation; and a two-year trial period during which the acceding country’s national currency must float within a plus-or-minus 15 percent currency band against the euro.

As cracks have begun to show in both the political and economic support for the eurozone, however, it is clear that the convergence criteria failed to overcome divergent geography and history. Greece’s violations of the Growth and Stability Pact are clearly the most egregious, but essentially all eurozone members — including France and Germany, which helped draft the rules — have contravened the rules from the very beginning....

Germany would therefore not be leaving the eurozone to save its economy or extricate itself from its own debts, but rather to avoid the financial burden of supporting the Club Med economies and their ability to service their 3 trillion euro mountain of debt. At some point, Germany may decide to cut its losses — potentially as much as 500 billion euros, which is the approximate exposure of German banks to Club Med debt — and decide that further bailouts are just throwing money into a bottomless pit. Furthermore, while Germany could always simply rely on the ECB to break all of its rules and begin the policy of purchasing the debt of troubled eurozone governments with newly created money (“quantitative easing”), that in itself would also constitute a bailout. The rest of the eurozone, including Germany, would be paying for it through the weakening of the euro.

Were this moment to dawn on Germany it would have to mean that the situation had deteriorated significantly. As STRATFOR has recently argued, the eurozone provides Germany with considerable economic benefits. Its neighbors are unable to undercut German exports with currency depreciation, and German exports have in turn gained in terms of overall eurozone exports on both the global and eurozone markets. Since euro adoption, unit labor costs in Club Med have increased relative to Germany’s by approximately 25 percent, further entrenching Germany’s competitive edge....

Europe therefore finds itself being tied in a Gordian knot. On one hand, the Continent’s geography presents a number of incongruities that cannot be overcome without a Herculean (and politically unpalatable) effort on the part of Southern Europe and (equally unpopular) accommodation on the part of Northern Europe. On the other hand, the cost of exit from the eurozone — particularly at a time of global financial calamity, when the move would be in danger of precipitating an even greater crisis — is daunting to say the least.

The resulting conundrum is one in which reconstitution of the eurozone may make sense at some point down the line. But the interlinked web of economic, political, legal and institutional relationships makes this nearly impossible. The cost of exit is prohibitively high, regardless of whether it makes sense".

Peter Zeihan, et. al., "Germany, Greece and Exiting the Eurozone," 18 May 2010, in

"De Gaulle's whole argument was based on the premise that nothing European could be undertaken so long as Europe was not a political reality. But at the same time he affirmed that the only political reality was the nation-state. What then was this 'Europe' that he was calling for with so much obvious sincerity? 'A vast confederation of States'....All that was clear was his wish to include Germany, harnessed by an agreement giving France the dominant role, especially as regards to defence. The whole system, finally, was to be validated by referendum....Our approach was very different. We believed in starting with limited achievements, establishing de facto [emphasis in the original] solidarity, from which a federation would gradually emerge. I have never believed that one fine day Europe would be created by some great political mutation, and I thought it wrong to consult the peoples of Europe about the structure of a Community of which they had no practical experience....That night gave us the final proof - if we still needed it - that a Europe of sovereign States was incapable, despite its leaders goodwill, of reaching the sensible decisions that were needed for the common good. It would be quite another matter, however once the power of decision was entrusted to institutions serving the general interest and applying the will of the majority in a system of common rules".

Jean Monnet, Memoirs, translated by Richard Mayne, 1978, pp. 366-367, 370-371.

"It makes one laugh when they say that we shall have an idyllic peace when we have re-established the European equilibrium - which was upset, according to some by the immoderate German ambition....But - since when has this beautiful, desired, praise- orthy, European equilibrium even existed? Since when has a lasting peace, which would become perpetual, been seen in Europe....Surely those who dream of a future completely different to the past willingly shut their eyes to experience, and fly off into the nebulous regions of their imagination. Exactly fifty years ago they tried to persuade us that war had become impossible....All that chatter has brought us to the present war, which is the most widespread, the most expensive, the most tremendous of all wars which have ever taken place. Unfortunately, the tracts which are being written on the idyll of a future peace will have no better luck. They may be useful consolation to those who suffer - they are certainly not probable forecasts of the future..."

Vilfredo Pareto, "War and its principal sociological factors", March 1915, in The Other Pareto, p. 233.

Which crisis can it be said is occurring in Europe at the moment? In point of fact the correct answer to that question is: both. There is a crisis of the Eurozone. Which for reasons which have been explicated ad nauseam elsewhere (see in particular: Joseph Stiglitz, "Reform the Euro or bin it," 5 May 2010, in, has had a damned inheritance and which it seems it might not be able to overcome it economically speaking. In addition, we have a crisis of what Gideon Rachman, in his cri de coeur, calls the 'European dream'. Perhaps the more cynically inclined `a la Pareto, would call it: 'the European mid-summer nights dream'. Meaning that in an important sense, the foundations of the European idea, were fraudulent from the very get-go. Specifically, it is possible to imagine that Europe, could have worked as a machtstaat, run from say Berlin, or Paris, or indeed (for argument's sake) Brussels. It is to a lesser extent possible to imagine that a 'Europe of the Patries' `a la Charles de Gaulle, might also have worked. Just perhaps. But, it is good to remember that de Gaulle, only foresaw such an arrangement working in the context of a dominate, if not necessarily domineering France. And, only in the company of the original 'six' member states of the EU: the Benelux countries, Italia, Germany and France. What now seems rather obvious is that the European projet as originally envisioned by Monsieurs Monnet, Schuman, et al., has reached its institutional cul de sac. Without a (to use the unfortunate, but in this case apt mot) 'sovereign', meaning a center of power & authority, the EU, has (as I have observed in this journal over the years) evolved into a mere 'talking shop', pur et simple. The original ethos (such as it was) which still had some life to it, in the years that Jacques Delor was still on the scene has run into the ground. But, those days are truly gone. And, I sincere doubt that anything will occur to resurrect that particular dynamic and vision ever again. Which to be honest, would have by itself, occurred eventually, since the 'European Dream', such as it was and is, was never workable at its base: without a hegemonic power at its center, 'Europe', cannot by its very nature evolve into something resembling the structure that Monnet was dreaming of circa 1949-1952. And, in that respect, it can be seen in retrospect, that it was General de Gaulle, who had the better of the argument. If 'Europe' was to have become something greater than the sum of its national parts, then that can only be arrived at as a political decision by the peoples and nations of Europe. Not, `a la Monnet, by some combination of Fabian tactics and political organicism. The end result of the latter is now plain to see: a disunited and deadlocked EU, which is disunited and deadlocked precisely because politically speaking, the elites of Brussels and elsewhere are unable to make a political argument as to why the populations of Germany, Austria and elsewhere should spend good money after bad in places like Greece, Portugal, Spain, et cetera. As indeed, in retrospect, they were unable to make a convincing argument for the whole notion of the Euro replacing national currencies, other than by utilizing the political equivalent of a confidence trick. Like all such tricks, they work as long as one does not test them. Once, tested (one thinks here of the Treaty of Locarno) they rapidly fall apart. One fears that the Euro projet will go the same way. As for the 'EU' instead of evolving into Monnet's beau idee, it has evolved into something resembling a 21st century Holy Roman Empire. A most noble and praise-worthy political entity (as many historians now tend to see it: viz, Timothy Blanning among others), but, unfortunately, an entity which in in the last one hundred and fifty years of its existence, proved to be nugatory at best. Similarly, with only its acclaimed 'soft power', to show for its pains, and, that being run into the ground by the its current crisis as well as the after effects of the financial crisis of the last three years, the European Union, has shown itself to be (in the words of the late Richard Nixon) 'a pitiless, helpless Giant'.


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